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Broadcasters let out a small sigh of relief today when the FCC made clear there is no requirement that TV stations have private investigators on staff.

With TV stations’ political files now available online, three political activist organizations have been jointly filing complaints against TV stations alleging various errors and omissions in online public file paperwork relating to political ad buys by third-party advertisers. These three organizations, the Campaign Legal Center, Sunlight Foundation, and Common Cause, expanded their campaign (no pun intended) substantially in mid-July, when they filed complaints against a Washington, DC and a Portland, Oregon TV station. Rather than paperwork problems, however, these complaints claimed that the stations had failed to accurately disclose on-air the true identity of the sponsor behind certain “Super PAC” political ads. In both cases, the complainants asserted that their own research indicated the PACs were mostly or entirely funded by a single individual, and that the stations should have therefore identified that individual rather than the PAC as the sponsor of the political spot.

While there is ample precedent for requiring broadcasters to be comfortable that the sponsorship information in a political spot is accurate, the most recent complaints concerned broadcasters for two reasons. First, there apparently was no question that the PACs had indeed been the ones to write the check for the ads and were valid legal entities, so a TV station altering the sponsorship identification text to specify the station’s opinion as to who the “real” sponsor is raises numerous legal issues, not the least of which is that the station could well get it wrong. For example, it would be a pretty brazen station that would change the sponsorship identification on Microsoft ads to “paid for by Bill Gates” on the theory that Bill Gates was the main “person” behind the organization that wrote the check. Of course, in this example the station would be doubly wrong, as Bill Gates ceased being the largest shareholder of Microsoft in May of this year, demonstrating the risk a station takes in attempting to be the arbiter of who is “behind” an advertiser.

This example also demonstrates the second issue that concerned broadcasters about the complaints. If, in the absence of an obvious sham advertiser, broadcasters had an obligation to ignore the “name on the check” and attempt to discern the actual source of the check writer’s income, they would need a full-time staff of researchers doing nothing but verifying the structure of advertisers. In addition, the airing of political ads would be perpetually delayed while stations seek adequate certainty that they have discerned the true source of all ad funds.

The result would be a no-win situation for broadcasters, who would have to expend enormous resources trying to determine where an advertiser’s money comes from, and having done that, expose themselves to both private liability (from the advertiser who wasn’t credited as the sole sponsor of the spot, as well as from the individual who was) and regulatory liability (if the government disagrees with the licensee’s sponsorship conclusions).

Today, the FCC wisely avoided placing broadcasters in that conundrum, ruling in a letter decision that:

We conclude that the complaints do not provide a sufficient showing that the stations had credible evidence casting into doubt that the identified sponsors of the advertisement were the true sponsors. As the Commission has stated previously, “unless furnished with credible, unrefuted evidence that a sponsor is acting at the direction of a third party, the broadcaster may rely on the plausible assurances of the person(s) paying for the time that they are the true sponsor.” While the complaint against [the station] presented some evidence that station employees may have come across facts in the course of news reporting on political issues that could have raised questions in their minds concerning the relationship of NextGen Climate Action Committee and Tom Steyer, we exercise our discretion not to pursue enforcement in this instance, given the need to balance the “reasonable diligence” obligations of broadcasters in identifying the sponsor of an advertisement with the sensitive First Amendment interests present here.

While it is reassuring that the FCC moved quickly to reject the complaints, today’s action leaves the political sponsorship identification waters somewhat murky. In addition to the less than comforting “we exercise our discretion not to pursue enforcement in this instance” language, the FCC proceeded to state that “[o]ur approach might have been different if the complainants had approached the stations directly to furnish them with evidence calling into question that the identified sponsors were the true sponsors.” In using this language, the FCC suggests that the only problem with the complaints “might have been” that the complainants didn’t present their evidence to the stations while the spots were still airing so that the stations could have assessed the evidence at the time and decided whether to modify the sponsorship identification.

While that ruling is generally consistent with past FCC rulings, in that a broadcaster must be presented with “credible, unrefuted evidence that a sponsor is acting at the direction of a third party,” the FCC sidestepped the equally important issue of when a PAC’s sponsorship identification may be deemed adequate, or if PAC contributors must be listed instead. As a result, broadcasters are left wondering if a sponsorship identification will be second-guessed when 80%, 90%, 95%, 99%, or some other percentage of the sponsor’s income comes from one source. Similarly, what if only 50% comes from one individual, but the other 50% comes from another individual, and the two are say, brothers? Once again, broadcasters are being asked, on pain of liability, to make disclosure decisions for PACs that are more correctly the province of the Federal Election Commission.

Of course, the sponsorship identification requirement is not limited to political ads, and the flaws in the approach suggested by the complainants seem jarringly obvious when applied in the context of a business advertiser. For example, should ads for every Mom and Pop business disclose that the real sponsor is not the business, but Mom and Pop, who gave up their vacation this year in order for the business to be able to afford broadcast advertising? Similarly, if it is not the entity writing the check for advertising that is relevant, but the principal source of its income, shouldn’t all ads placed by defense contractors need to disclose the U.S. government as the actual sponsor of their ads?

On the other hand, if, as the FCC has suggested in past sponsorship decisions, the real issue is the identity of the decision maker for that advertiser, how could a broadcaster ever know that information with adequate certainty to reject the assurances of the advertiser and take on the liability of unilaterally changing sponsorship identifications in ads?

To be clear, no one is suggesting that a sponsor should be able to avoid on-air attribution by creating a phony front organization whose faux nature is obvious to all, including the broadcaster. However, a Political Action Committee is an entity legally recognized under the law, which is also regulated by law. If more information about its contributors is deemed a public good, Congress and the Federal Election Commission have the authority and the responsibility to take action to accomplish that result. In the absence of such action, the task should not fall to broadcasters by default.

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I wrote a post here in June on the FCC’s release of its proposed regulatory fees for Fiscal Year 2014. Normally, the FCC releases an order adopting the official fee amounts and the deadline by which they must be filed in early to mid-August of each year. This year, however, licensees were beginning to get nervous, as August was coming to a close and there had still been no word from the FCC as to the final fee amounts and how quickly they must be paid.

Fortunately, the FCC was able to get the fee order out this afternoon, on the last business day of August. Unfortunately, because the Public Notice of the release occurred on the Friday before a three day weekend, many licensees may miss that announcement. According to today’s Public Notice, full payment of annual regulatory fees for Fiscal Year 2014 (FY 2014) must be received no later than 11:59 PM Eastern Time on Tuesday, September 23, 2014. As of today, the Commission’s automated filing and payment system, the Fee Filer System, is available for filing and payment of FY 2014 regulatory fees. A copy of the Public Notice with the details is available here.

Also, as noted in a footnote to that Public Notice, “[c]hecks, money orders, and cashier’s checks are no longer accepted as means of payment for regulatory fees. As a result, it is the responsibility of licensees to make sure that their electronic payments are made timely and the transaction is completed by the due date.” Time to rack up those credit card frequent flyer miles!

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August 2014

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Nonexistent Studio Staff and Missing Public Inspection File Lead to $20,000 Fine
  • Failure to Route 911 Calls Properly Results in $100,000 Fine
  • Admonishment for Display of Commercial Web Address During Children’s Programming

Missing Public Inspection File and Staff Result in Increased Fine

A Regional Director of the FCC’s Enforcement Bureau (the “Bureau”) issued a Forfeiture Order against a Kansas licensee for failing to operate a fully staffed main studio as well as for failing to maintain and make available a complete public inspection file.

Section 73.1125(a) of the FCC’s Rules requires that a broadcast station have a main studio with a “meaningful management and staff presence,” and Section 73.3526(a)(2) requires that a broadcast station maintain a public inspection file. In July of 2012, a Bureau agent from the Kansas City Office tried to inspect the main studio of the licensee’s station but could not find a main studio. Although the agent was able to find the station’s public inspection file at an insurance agency in the community of license, the file did not contain any documents dated after 2009. After the inspection, the licensee requested a waiver of the main studio requirement, which the FCC’s Media Bureau ultimately denied.

In May of last year, the Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against the licensee. In the NAL, the Bureau noted that the base fine for violating the main studio rule is $7,000 and the base fine for violating the public file rule is $10,000. However, due to the over two-year duration of the public inspection file violation and the 14 month duration of the main studio violation, the Bureau increased the base fines by $2,000 and $1,000, respectively, resulting in a total proposed fine of $20,000.

In its response to the NAL, the licensee did not deny the facts asserted in the NAL. Therefore, the Forfeiture Order affirmed the factual determinations that the licensee had violated Sections 73.1125(a) and 73.3526(a)(2) of the FCC’s Rules. However, in its NAL Response, the licensee requested that the proposed fine be reduced because the licensee’s station serves a small market and it would face competitive disadvantages if it were required to fully staff the main studio.

The Bureau rejected the licensee’s request to reduce the fine based on an inability to find qualified staff because there is no exception to Section 73.1125(a)’s requirement of a main studio due to staffing shortages. The Bureau also pointed out that the licensee had no staff presence at the main studio for more than a year. The Bureau briefly entertained the idea that the licensee had intended to argue that it was financially unable to maintain a fully staffed studio; however, since the licensee did not submit any financial information with its response to the NAL, the Bureau dismissed the possibility of reducing the fine amount based on the licensee’s inability to pay.

The Bureau also rejected the licensee’s argument that maintaining a main studio would place the station at a competitive disadvantage because the licensee’s main studio waiver request was based only on financial considerations, which is not a valid basis for a waiver of the main studio rule. Moreover, the Bureau pointed out that even if the waiver had been granted and the licensee had then staffed the studio, corrective action after an investigation has commenced is expected by the FCC, and does not warrant reduction of cancellation of a fine. Therefore, the Bureau affirmed the fine of $20,000.

Automated Response to 911 Calls Leads to Substantial Fine

The Enforcement Bureau issued an NAL against an Oklahoma telephone company for routing 911 calls to an automated operator message in violation of the 911 Act and the FCC’s Rules.

Under Section 64.3001 of the FCC’s Rules, telecommunications carriers are required to transmit all 911 calls to a Public Safety Answering Point (“PSAP”), to a designated statewide default answering point, or to an appropriate local emergency authority. Section 64.3002(d) of the FCC’s Rules further requires that if “no PSAP or statewide default answering point has been designated, and no appropriate local emergency authority has been selected by an authorized state or local entity, telecommunications carriers shall identify an appropriate local emergency authority, based on the exercise of reasonable judgment, and complete all translation and routing necessary to deliver 911 calls to such appropriate local emergency authority.”
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The Federal Communications Commission recently adopted a Report and Order to streamline and eliminate outdated provisions of its Part 17 Rules governing the construction, marking, and lighting of antenna structures. According to the Commission, the goal was to “remove barriers to wireless deployment, reduce unnecessary costs, and encourage providers to continue to deploy advanced systems that facilitate safety while preserving the safeguards to protect historic, environmental and local interests.” The question, as Commissioner O’Rielly put it, is “why did it take nine years to get this item before the Commission for a vote?” While it was a long time in coming, the changes the FCC made will be mostly welcomed by tower owners across the country.

The need for changes to the rules was first raised in the FCC’s 2004 Biennial Ownership Review, and the FCC initiated a formal review of the antenna structure rules in 2010 in a Notice of Proposed Rulemaking. The FCC’s goal in streamlining Part 17 of its rules was to improve compliance and enforcement while eliminating unnecessary and burdensome requirements for tower owners. The revised rules impact a number of regulations, and the hope is that the changes will also harmonize the FCC’s rules with the safety recommendations and rules of the Federal Aviation Administration (FAA). That said, in its update, the FCC made a point of removing from its rules references to FAA Circulars that the FCC has determined are out of date.

The primary changes to the rules that tower owners should be aware of are:

Antenna Structure Marking and Lighting Specifications. The Order updated the FCC’s rules to require that tower owners comply with the marking and lighting specifications included in the FAA’s “no hazard” determination for that particular tower, thereby making FCC and FAA regulations consistent in this area. The Order also emphasized that changes to marking and lighting specifications on an Antenna Structure Registration (ASR) require prior approval from both the FAA and the FCC. Importantly, the FCC specifically declined to require existing antenna structures to comply with any new lighting or marking requirements unless mandated to do so by the FAA.

Accuracy of Height and Location Data. The FCC noted in the Order that its prior rules did not define what kinds of “alterations” to an existing tower required a new registration and FCC approval prior to making those changes. The new rules are clear that FCC approval is required for any change or correction to a structure of one foot or greater in height, or one second or greater in location, relative to the existing information in the structure’s ASR form. The new criteria is the same as that used by the FAA for requiring a new aeronautical study and determination of “no hazard”.

Notification of Construction or Dismantlement. Tower owners are now required to notify the FCC within five days of “when a construction or alteration of a structure reaches its greatest height, when a construction or alteration is dismantled or destroyed, and when there are changes in structure height or ownership.” Under the prior rules, structure owners were given only 24 hours to provide notification to the FCC.

Voluntary Antenna Structure Registration. Under the FCC’s prior rules, tower owners were given the option to voluntarily register structures even when the FCC’s rules did not require registration. The new rules will still allow voluntary registration, but parties will be allowed to indicate that the registration is indeed voluntary, and they will not be subject to the Part 17 rules that apply to towers that are required to be registered (i.e., towers that exceed 200 feet or, for those located in close proximity to an airport, lower heights).

Posting of Antenna Structure Registrations. The new ASR posting requirement gives tower owners greater latitude regarding where they must post their Antenna Structure Registration numbers. The old rule required that the ASR number be displayed “in a conspicuous place so that it is readily visible near the base of the antenna structure.” As a result of the rule change, registration numbers can now be posted at the “closest publicly accessible” location near the tower base.

Providing Antenna Structure Registration to Tower Tenants. Tenant copies of ASRs will no longer need to be given to tenants in paper. Under the new rules, a link to the FCC’s website can be provided by mail or email.

Inspection of Structure Lights and Associated Control Equipment. The Order established a process allowing qualifying network operations center-based monitoring systems to be exempted from the existing quarterly inspection requirements that apply to automatic or mechanical control devices, indicators, and alarm systems used to ensure tower lighting systems are functioning properly. Specifically, systems with advanced self-diagnostic functions, an operations center staffed with “trained personnel capable of responding to alarms 24 hours per day, 365 days per year”, and a backup network operations center that can monitor systems in the event of failure, may be eligible for the exemption.

Notification of Extinguishment or Improper Functioning of Lights. The FCC’s rules require that when tower lights do go out, tower owners immediately notify the FAA so that the FAA can issue a Notice to Airmen (NOTAM) to make aircraft aware of the outage. Parties are also required to notify the FAA when repairs have been completed so that the FAA can cancel the NOTAM. Under the new rules, tower owners are required to keep the FAA up to date and let the FAA know when repairs are expected to be complete at the expiration of each NOTAM (which last 15 days each). The good news is that the FCC clarified its rules somewhat, stating that lighting repairs must be completed “as soon as practicable”. Instead of adopting a fixed deadline for repairs to be made, the FCC will consider whether the tower owner has exercised due diligence and made good faith efforts to complete repairs in a timely manner.

Recordkeeping Requirements. Under the FCC’s prior rules, there was no specification regarding how long records of improper functioning needed to be kept. Under the newly adopted rules, the FCC requires antenna structure owners to maintain records of observed or otherwise known outages or improper functioning of structure lights for two years, and the records must be provided to inspectors upon request.

Maintenance of Painting. With regard to painting, the FCC adopted the FAA’s “In-Service Aviation Orange Tolerance Chart” as the standard for determining whether an antenna structure needs to be cleaned or repainted. The FCC did not say how often towers should be repainted or how close someone has to be to compare the colors on the chart with those on the tower. The FCC did say that placing the chart over a portion of the top half of the tower would give the best results, as that is where most of the wear and tear typically occurs.

The new rules will take effect thirty days after notice of the Order is published in the Federal Register (except for those provisions requiring Office of Management and Budget approval), which has not yet occurred. Despite the time it took to adopt new rules, the rule changes themselves are relatively straightforward, and tower owners should be sure to take advantage of the new rules when they take effect. It’s not every day we see less regulation from the FCC.

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For those who follow my speaking schedule on our CommLawCenter Events Calendar… wait, no one follows my speaking schedule? Disappointing. Well if you had, you would have known I was speaking on a pair of regulatory panels at the Texas Association of Broadcasters’ convention yesterday (incidentally, another great show this year from Oscar Rodriguez and TAB’s excellent staff).

On the first of those panels, with Stephen Lee of the FCC’s Houston Enforcement Bureau office, we discussed the FCC’s July 1st expansion of the TV online political file requirement to all TV stations. During that discussion, an audience member asked whether radio stations would someday have to put their public inspection files online as well. I noted that when the FCC moved TV public files online in August of 2012, it had indicated that it was starting with TV, but anticipated it would eventually consider moving radio public files online as well. However, in the two years since, the FCC has focused on working the bugs out of the online public file software and has not mentioned expanding the online requirement to radio.

Unknown to most, that changed unexpectedly about two hours after the panel, when the FCC released a Public Notice rapidly responding to a petition for rulemaking filed just six days earlier by the Campaign Legal Center, Common Cause and the Sunlight Foundation. The petition asked that cable and satellite providers also be required to post their political files online. While broadcasters and those three organizations (who have filed more than a dozen complaints against TV stations for alleged online political file violations in the past few months) haven’t seen eye to eye on much in the past, this might be one requirement they can agree on, albeit for very different reasons.

While the original purpose of the political file was to ensure that candidates had the information needed to enforce their rights to equal opportunity and lowest unit rate for advertising, the Campaign Legal Center, Common Cause and the Sunlight Foundation have sought to use it instead to track political spending by PACs, since that information is not available, at least in real time, from the Federal Election Commission. To make it easier for them to access this information, they demanded the FCC require that TV stations post their political files online. They have also urged the FCC to require TV stations’ political files be posted in a machine-readable format to make aggregating the information easier.

Broadcasters opposed those efforts, noting the burden of keeping the fast-changing political file up to date online, and the competitive concerns with posting sensitive ad rate data online for all the world to see. In particular, they found it competitively unfair that broadcasters were required to post their ad rate information online when competing cable and satellite providers were not.

The FCC agreed, and when it decided to require that TV stations post their public files online, it originally excluded the political file from that requirement, finding that uploading and updating the political file online would be too burdensome. However, after a change in personnel at the FCC, the agency reversed course and concluded that posting the political file online wouldn’t be burdensome after all.

Television broadcasters therefore likely welcomed yesterday’s Public Notice seeking comment on at least leveling the information playing field with cable and satellite. However, buried in the middle of the Public Notice, and completely unrelated to the petition for rulemaking on cable and satellite political files to which the Public Notice responds, is a single sentence sending chills down the collective spines of radio broadcasters:

“We also seek comment on whether the Commission should initiate a rulemaking proceeding to require broadcast radio stations to use the online public file, and on an appropriate time frame for such a requirement.”

While the need to first launch a rulemaking means that a radio online public file requirement would take at least some time to implement, it appears that it is indeed (spontaneously) back on the FCC’s agenda. With staffs that are typically much smaller than those of TV stations, radio stations would undoubtedly find an online public file requirement to be far more burdensome than it was for TV (not that TV stations found it to be a picnic either). If they don’t want to find themselves facing that very burden in the not too distant future, radio licensees will need to speak up in what most would have assumed is a completely unrelated proceeding. To the broadcaster who asked that question at yesterday’s panel, the FCC has quietly changed my answer.

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The FCC’s July 11, 2014 Order, concluding that clips of video programming shown by broadcasters are required to be captioned when delivered on the Internet, was published in the Federal Register this week. The rule specifically applies when a provider posts a video clip or video programming online that was first aired on television (“covered” Internet Protocol (IP) video). The FCC ultimately plans to expand its Twenty-First Century Communications and Video Accessibility Act of 2010 (CVAA) captioning rules to cover all forms of video programming on the Internet.

As I have discussed many times previously, the FCC requires that certain video programming delivered online by television stations be captioned if that programming previously aired on television with captions. Some of my recent posts on the subject can be found at the following links: “FCC Seeks Greater Clarity on IP Video Captioning Rules”, “Second Online Captioning Deadline Arrives March 30”, and “First Online Video Closed Captioning Deadline Is Here”.

More recently, I noted that the FCC sought comment on information regarding whether it should remove the “video clip” exemption from its rules. The FCC’s final answer was “yes”. The rules will apply to video clips regardless of their content or length.

According to the FCC, the new rules are intended to accomplish the following:

  • Extend the IP closed captioning requirements to IP-delivered video clips if the video programming distributor or provider posts on its Web site or application a video clip of video programming that it published or exhibited on television in the United States with captions;
  • Establish a schedule of deadlines for purposes of the IP closed captioning requirements;
  • After the applicable deadlines, require IP-delivered video clips to be provided with closed captions at the time the clips are posted online, except as otherwise provided;
  • Find that compliance with the new requirements would be economically burdensome for video clips that are in the video programming distributor’s or provider’s online library before January 1, 2016 for “straight lift clips”, and January 1, 2017 for “montages”; and
  • Apply the IP closed captioning requirements to video clips in the same manner that they apply to full-length video programming, which among other things means that the quality requirements applicable to full-length IP-delivered video programming will apply to video clips.

In its Order, the FCC also established the following set of deadlines for providing captions based on the type of video clip shown:

  • January 1, 2016: for “straight lift” clips, which include a “single excerpt of a captioned television program with the same video and audio that was presented on television”;
  • January 1, 2017: for “montages”, which are defined as a single file containing “multiple straight lift clips”; and
  • July 1, 2017: for “video clips of live and near-live television programming, such as news or sporting events”, keeping in mind that there is a “grace period” of twelve hours to caption “live video programming” and eight hours to caption “near-live programming.”

As part of the item, the FCC also issued a Second Further Notice of Proposed Rulemaking, which proposes to extend the reach of the FCC’s captioning rules even further. Among other things, the Further Notice is specifically asking for comment regarding whether: (1) third party video programming providers and distributors should be subject to the closed captioning requirements; (2) the FCC should decrease or eliminate the “grace periods” for “live” and “near-live” programming; (3) application of the IP closed captioning requirements should be extended to “mash-ups”, which the FCC defines as files that “contain a combination of video clips that have been shown on television with captions and online-only content”; and (4) application of the IP closed captioning rules to “advance” video clips “that are first added to the video programming distributor’s or provider’s library on or after January 1, 2016 for straight lift clips or January 1, 2017 for montages, but before the associated video programming is shown on television with captions, and which then remain online in the distributor’s or provider’s library after being shown on television.”

Comments on the Further Notice are due October 6, 2014, and reply comments are due November 3, 2014.

As is often the case, the new closed captioning rules adopted by the FCC are complex and parties should make sure that they remain up to speed with the rapid pace of the ever evolving rules in this area. The Order and Further Notice demonstrate that the FCC appears far from satisfied with the many new closed captioning rules that it has already adopted in recent years and that there will undoubtedly be additional rules to deal with in the not too distant future.

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July 2014

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Multi-Year Cramming Scheme Results in $1.6 Million Fine
  • Violation of Retransmission Consent Rules Leads to $2.25 Million Fine
  • $25,000 Fine for Failure to Respond to FCC

Continued Cramming Practices Lead to Double the Base Fine

The FCC recently issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a Florida telephone company for “cramming” customers by billing them for unauthorized charges and fees related to long distance telephone service.

The FCC had received more than 100 customer complaints against the company. The complaints alleged that the company had continued to bill the customers and charge them late fees after they had paid their final bills and canceled their service with the company. The FCC opened an investigation in response to the complaints and issued a Letter of Inquiry (“LOI”) to the company in July 2011, but the company did not submit a timely response. The FCC issued an NAL in 2011 proposing a $25,000 fine against the company for its failure to reply to the LOI, and ultimately issued a Forfeiture Order fining the company $25,000.

Section 201(b) of the Communications Act of 1934 (the “Act”) requires that that “[a]ll charges . . . in connection with . . . communication service shall be just and reasonable.” Prior decisions of the FCC have determined that placing unauthorized charges and fees on consumers’ phone bills is an “unjust and unreasonable” practice and is therefore unlawful.

The NAL provides information from 11 customer complaints detailing instances where customers attempted to cancel their service and continued to be charged late fees and other fees by the company. The FCC determined that the phone company did not have authorization to continue billing these customers after they canceled their service.

Although the FCC’s Forfeiture Guidelines do not provide a base fine for cramming, the FCC has settled on $40,000 as the base fine for a cramming violation. The NAL addressed 20 cramming violations, which would create a base fine of $800,000. However, the FCC determined that an upward adjustment of the fine was appropriate in this case because the unlawful cramming practices had been occurring since 2011, the company did not respond to the 2011 LOI, and there was a high volume of customers who received cramming charges. Therefore, the FCC increased the proposed fine by $800,000, resulting in a total proposed fine of twice the base amount, or $1.6 million.

Cable Operator’s Retransmission of Six Texas TV Stations Results in Multi-Million Dollar Fine

Earlier this month, the FCC issued an order against a cable operator for rebroadcasting the signals of six full-power televisions stations in Texas in violation of the FCC’s retransmission consent rules.

The cable operator serves more than 10,000 subscribers in the Houston Designated Market Area (“DMA”) in 245 multiple-dwelling-unit buildings and previously had retransmission consent agreements with the stations. However, those agreements expired in December 2011 and March 2012. The cable operator continued retransmitting the signals of those stations without extending or renewing the retransmission consent agreements, and the licensees notified the cable operator that its continued retransmissions were illegal. Subsequently, each licensee filed a complaint with the FCC.

In its May 2012 response to the complaints, the cable operator did not deny that it had retransmitted the stations without the licensee’s express written consent, but said that it had relied on the master antenna television (“MATV”) exception to the retransmission consent requirement. The cable operator noted that it had begun converting its buildings to MATV systems in November 2011 and had hoped to complete the installations before the retransmission agreements expired in December 2011, but did not complete the MATV installation until July 26, 2012.
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For those of you following our numerous posts on EAS matters over the years, a new chapter starts today. After participating in EAS summits and meetings for such a long time, it’s hard to disagree that working to improve emergency alerts for all of us is one of the more important items before the FCC. The EAS summits hosted to address improvements to the alert system have been very useful toward achieving that goal, and many thanks should go out to the state broadcasters associations, the FCC, FEMA, the National Association of Broadcasters, Capitol Hill staff, and many others for working hard to save lives in emergencies, realizing in particular the vital role that local broadcasters play in that effort.

Today, the FCC’s latest EAS NPRM was published in the Federal Register, which means that parties will have 30 days to file comments and an addition fifteen days for reply comments. Comments are therefore due on August 14, and reply comments are due on August 29.

The NPRM is highly technical, but the proposed changes to Part 11 of the Commission’s Rules are a response to the nationwide EAS test held in November 2011. The FCC notes in the NPRM that since the national test, it has implemented CAP and the Wireless Emergency Alert system to standardize geographically-based alerts and interoperability among equipment. According to the Commission, the proposals in the NPRM are intended as first steps to fix the vulnerabilities uncovered in the national test.

A copy of the NPRM can be found here.

Lots of very specific questions are posed in the NPRM, but the principal proposals are:

  • The FCC proposes that all EAS participants have the capability to receive a new six zero (000000) national location code. The national test used a location code for Washington, DC, but many EAS units apparently rejected it as outside their local area. The FCC says that the proposal is intended to remedy this problem by providing a code that will trigger EAS units regardless of location.
  • The second major proposal is to amend the rules governing national EAS tests. The FCC proposes to amend the rules to create an option to use the National Periodic Test (NPT) for regular EAS system testing and seeks comment on the manner in which the NPT should be deployed.
  • The Commission is also proposing to require that all EAS Participants submit test reports on an electronic (as opposed to paper) form. The information in the electronic reports that identifies monitoring assignments would then be integrated into State EAS Plans. The FCC proposes to designate the EAS Test Reporting System (ETRS) as the primary EAS reporting system and to require that all EAS Participants submit nationwide EAS test results data electronically via the ETRS for any future national EAS test.
  • The NPRM also asks whether the FCC should require that emergency crawls be positioned to remain on the screen (and not run off the edge of the screen) and be displayed for the duration of an EAS activation.

Finally, although not a primary topic of the NPRM, the FCC proposes that a reasonable time period for EAS Participants to replace unsupported equipment and to perform necessary upgrades and required testing to implement the proposed rules be six months from the effective date of any rules adopted as a result of the NPRM.

The NPRM attempts to tackle some difficult technical issues and is a tough read. However, given what is at stake, and the challenges of implementing a more nationwide approach to EAS, it is worth the effort.

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June 2014

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Bad Legal Advice Leads to Admonishment for Public File Violations
  • $10,000 Fine for Tower Violation
  • Missing Emergency Alert System Equipment Results in $6,000 Fine

Licensee’s Poor Financial Condition and Reliance on Bad Legal Advice Fend Off Fines

Earlier this month, the FCC’s Enforcement Bureau issued an order against the former licensee of a Texas radio station admonishing the licensee but declining to impose $40,000 in previously proposed fines relating to public inspection file violations.
In December of 2010, agents from the Enforcement Bureau’s local office reviewed the station’s public inspection file and determined that, among other things, the file did not contain any quarterly issues-programs lists. In response, the FCC issued a Notice of Apparent Liability for Forfeiture (“NAL”), and ultimately a Forfeiture Order, imposing a fine of $25,000, which the licensee subsequently paid.

After the original NAL was issued, the station hired an independent consultant to assist it in ensuring that the station’s public inspection file was complete. In August of 2011, the licensee submitted a statement to the FCC in which it certified that all of the required documents had been placed in the station’s public inspection file. However, field agents visited the station again in October of 2011, and found that the public inspection file still did not contain any issues-programs lists. In response, the FCC issued two more NALs in June of 2012 (the “2012 NALs”) for the still-incomplete public inspection file and for the false certification submitted in response to the original NAL. The 2012 NALs proposed a $25,000 fine for providing false information to the FCC and a $15,000 fine for the still-missing issues-programs lists.

In this month’s order, the FCC analyzed the now-former licensee’s claim that it had engaged an independent consultant to assist it in responding to the original NAL and that it had subsequently placed documentation regarding issues-programs in its public inspection file. The FCC noted that the outside consultant’s advice that placing copies of the station’s daily program logs in the file would be adequate to meet the requirement was erroneous. However, since the licensee had sought to fix the problem by hiring a consultant and had relied on the consultant’s advice, the FCC concluded that the licensee had not negligently provided incorrect information to the Enforcement Bureau, and therefore the FCC did not impose the originally-proposed $25,000 fine for false certification.

In contrast, the FCC concluded that the former licensee had indeed willfully violated Section 73.3526 of the FCC’s Rules by not including issues-program lists in its public inspection file. The former licensee had, however, submitted documentation of its inability to pay and asked that it not be required to pay the proposed $15,000 fine. The FCC agreed that the former licensee had demonstrated its inability to pay, and therefore declined to impose the $15,000 fine.

In doing so, the FCC also noted that while “[r]eliance on inaccurate legal advice will not absolve a licensee of responsibility for a violation, [it] can serve as evidence that the licensee made an effort to assess its obligations, that its assessment was reasonable, if erroneous, and was made in good faith.” In light of all the facts, the FCC elected to formally admonish the former licensee, and warned that, should the former licensee later acquire broadcast licenses, it could face substantial monetary penalties, regardless of its ability to pay, for future rule violations.
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In a 6-3 decision released this morning, the Supreme Court didn’t just rain on Aereo’s parade, but drenched it. For a case involving fairly convoluted points of law, the Supreme Court’s decision is surprisingly straightforward: if it walks like a duck and quacks like a duck, no amount of technology will change the fact that it is a duck.

At this early stage of the case–keep in mind this was just about whether an injunction against Aereo should have been issued by the lower courts for one specific type of copyright infringement–the question before the Court was whether Aereo’s system “performs” broadcasters’ copyrighted works, and whether that is a “public” performance. If so, Aereo’s operations infringe on broadcasters’ copyrights in that programming. Aereo’s argument in response was that since its system does nothing until activated by a subscriber, and even then only transmits a single private copy to that subscriber, Aereo was not involved in generating public performances.

The Court strongly disagreed, finding that an essential purpose of Congress’s passage of the Copyright Act of 1976 was to make clear that transmissions of broadcast programming by third-parties to the public (e.g., cable systems) create public performances that implicate copyright law. Specifically, the Court noted “the [Copyright] Act is unmistakable: An entity that engages in activities like Aereo’s performs,” and “the fact that Aereo’s subscribers may receive the same programs at different times and locations is of no consequence. Aereo transmits a performance of petitioners’ works ‘to the public.'”

Aereo’s argument that it is just a renter of receiving equipment fared no better, with the Court stating: “We conclude that Aereo is not just an equipment supplier and that Aereo ‘performs.'” Of note for those concerned about whether an Aereo decision for broadcasters might affect the public’s ability to store other data in the cloud, the Court agreed with the brief filed by the Department of Justice that there is an important distinction between members of the public storing their own content in the cloud and those using the Internet to access the content of others, finding that a transmission to “the public” for purposes of implicating the Copyright Act “does not extend to those who act as owners or possessors of the relevant product.”

However, the most interesting aspect of the decision is that the Court is far more hostile to Aereo than even the 6-3 vote would indicate. Some of the strongest arguments against Aereo are actually found in Justice Scalia’s dissent, which was joined by Justices Thomas and Alito. While criticizing the majority for its “looks like a cable system” premise, in making his best case for finding in favor of Aereo, Justice Scalia makes two telling statements. The first, after he argues that Aereo is just a passive conduit for subscribers’ content reception and therefore does not “perform” broadcasters’ copyrighted content, is his statement noting

“[t]hat conclusion does not mean that Aereo’s service complies with the Copyright Act. Quite the contrary. The Networks’ complaint that Aereo is directly and secondarily liable for infringing their public-performance rights (Section 106(4)) and also their reproduction rights (Section 106(1)). Their request for a preliminary injunction–the only issue before this Court–is based exclusively on the direct-liability portion of the public performance claim…. Affirming the judgment below would merely return this case to the lower courts for consideration of the Networks’ remaining claims.”

Justice Scalia then goes much further, stating:

“I share the Court’s evident feeling that what Aereo is doing (or enabling to be done) to the Networks’ copyrighted programming ought not to be allowed. But perhaps we need not distort the Copyright Act to forbid it.”

He then proceeds to note again that there are other copyright infringement claims before the lower court that should be considered on remand, and that Congress is always free to modify the law to eliminate any perceived “loophole” if necessary.

As a result, while today’s ruling is a 6-3 decision in favor of granting an injunction against Aereo, it ultimately reads like a 9-0 rebuke of Aereo’s business plan. One of the most interesting legal analogies is also found in Justice Scalia’s dissent, where he likens Aereo to a copy shop where the shop owner plays no part in the content copied:

“A copy shop rents out photocopiers on a per-use basis. One customer might copy his 10-year-old’s drawings–a perfectly lawful thing to do–while another might duplicate a famous artist’s copyrighted photographs–a use clearly prohibited by Section 106(1).”

The reason this analogy is (perhaps unintentionally) revealing is that in the Aereo scenario, the subscriber can’t use the system to display his ten-year-old’s drawings; he can only display the content that Aereo puts on the shelf in its copy shop for the subscriber to access–all of which is copyrighted. Even if a particular program has entered the public domain, the broadcast signal–including its combination of program selections, current advertising, and station interstitials–is not in the public domain. In any event, Aereo has never attempted to limit its relay of content to subscribers to public domain materials (which admittedly would be the worst business plan ever).

While there had been some concern among broadcasters (and hope for Aereo supporters) after oral argument in this proceeding that Aereo was gaining traction with its claim that a ruling against Aereo was a ruling against innovation, the Court’s decision states that it sees today’s ruling as narrowly focused on the issue of transmission of broadcast signals, and that parties seeking to expand its principles to issues like cloud computing will have to wait until that issue is actually before the Court. In the meantime, the Court made clear that the only innovation it saw in Aereo was copyright infringement, and that has already been around for a long time.